Navigating IRS Audits: Tips, Remedies, and the Importance of Tax Attorneys

An IRS audit can be stressful for an individual or a business. Understanding the examination process, keeping records and seeking appropriate advice can help you respond accurately and protect your procedural rights. Selection does not itself mean that a return is wrong.

This article explains correspondence, office and field examinations, and distinguishes those formats from statistical selection through the National Research Program. It also describes practical responses and ways to address proposed findings; no strategy guarantees a favorable result.

Tax attorneys can advise on legal issues and represent taxpayers during an audit. You may also represent yourself, and qualified CPAs and enrolled agents have representation rights before the IRS. Choose assistance according to the issues, qualifications and agreed scope.

After an audit, reviewing the findings and maintaining accurate records can improve future compliance. Advice from Segal, Cohen & Landis (SCL) or another qualified professional may help, but cannot prevent future selection or guarantee financial stability.

Understanding the IRS Audit Process and Types of Audits

An IRS audit examines a taxpayer’s records and return to check compliance with federal tax law. The IRS initially notifies taxpayers by mail. Examinations may proceed by correspondence or through an in-person office or field interview:

1. Correspondence Audit
   The IRS letter requests information supporting specified return items, such as income or deductions. Follow the letter’s submission instructions and retain copies and delivery confirmation. If the records are too extensive to mail, ask whether an in-person examination is appropriate.
2. Office Audit
   An office examination involves an interview at an IRS office to review the issues and requested records. The scope depends on the return and questions under review; arrange representation and ask the examiner about required documents before the meeting.
3. Field Audit
   An interview may take place at your home, business or representative’s office. A revenue agent may examine records and ask questions relevant to the return. A field examination is not automatically a criminal investigation, and its scope varies.
4. The IRS National Research Program uses statistical examinations to study compliance. This is a selection method, distinct from mail, office, and field examination formats.

Tips for Proactively Managing and Responding to IRS Audits

Organized, truthful responses can help the IRS evaluate your return. The result depends on the facts and applicable law. Consider these practical steps:

1. Stay Organized
   Maintain accurate and organized financial records for easy access during an audit. Proper documentation will help validate your tax return and address any concerns raised by the IRS.
2. Respond Promptly and Honestly
   Meet the deadline in each notice and answer requests truthfully. If more time is needed, contact the examiner promptly; do not assume an extension has been granted. Ordinary response extensions do not extend a statutory court-filing deadline.
3. Be Prepared and Thorough
   Before meeting with an IRS examiner or providing documentation, review your tax return, and ensure you understand the reasoning behind all deductions, credits, and income reported. Consider consulting with a tax attorney or tax professional to help identify potential audit issues and develop appropriate responses.
4. Consult a Tax Attorney
   The guidance and representation of a skilled tax attorney can be invaluable throughout the audit process. An attorney can help interpret complex tax laws, advocate on your behalf, and negotiate with the IRS to advocate for a lawful, supported resolution.

The Role of Tax Attorneys in IRS Audits

A tax attorney can assist with the legal and procedural aspects of an examination. Possible services include:

1. Legal Knowledge
   An attorney with relevant experience can interpret tax rules and IRS procedures, assess the evidence and explain the strengths and weaknesses of a position. Qualifications and outcomes vary; no representative can ensure a particular audit result.
2. Representation
   An authorized attorney can communicate with examiners, organize supporting documents and present arguments about tax or penalties. Agree on responsibilities and provide complete information; representation does not eliminate your own obligations.
3. Disputed Results and Appeals
   If you disagree with proposed changes, review the report and notice with your representative. Depending on the case, options may include a manager conference, mediation or an administrative appeal. Follow the deadline and filing instructions in the notice; an administrative protest does not extend a separate court deadline. Settlement is not assured.
4. Protecting Taxpayer Rights
   Counsel can help you understand rights to information, fair treatment, confidentiality, representation and appropriate review. A lawyer can raise objections to improper actions, but cannot guarantee that every disagreement will be resolved in your favor.

Maintaining Tax Compliance after an IRS Audit

Compliance after an audit requires attention to later returns and changing obligations. These practices support accurate reporting but cannot prevent all future audits:

1. Review and Apply Audit Findings
   Audit results can provide valuable insights for improving your tax compliance. Review any findings from your audit and implement necessary changes to your recordkeeping, reporting, or tax planning strategies.
2. Seek Professional Tax Advice
   Regularly consult with a tax attorney or a tax professional to stay up-to-date with changes in tax laws and receive expert advice on complex tax situations or filing requirements.
3. Maintain Accurate Financial Records
   Keep accurate and up-to-date financial records to ensure timely, correct tax filings, and provide necessary documentation for any future audits or inquiries.
4. Stay Informed About Tax Obligations
   Educate yourself about your tax obligations and filing requirements, especially if your financial situation or tax circumstances change. Staying informed about tax responsibilities helps prevent inadvertent noncompliance and potential penalties.

Conclusion

Understanding the examination process, responding accurately and considering qualified representation can help you manage an IRS audit. Review the findings, preserve records and track response and appeal deadlines. Future compliance remains important regardless of the audit outcome.

If you face an IRS audit, contact Segal, Cohen & Landis to discuss the facts and possible representation. Confirm current availability, consultation terms and fees. Legal advice can clarify your options, but does not promise a favorable result.